Cronyism, Regulation, and Firm Productivity in Egypt

摘要: Using a large, original database of 385 politically connected firms under the Mubarak regime in Egypt, we document for first time negative impact cronyism on economic growth. In early 2000s, policy shift Egypt led to expansion crony activities into new, previously unconnected sectors. 4digit sectors that experienced entry between 1996 and 2006 lower aggregate employment growth during period than those did not. A wide array supporting evidence indicates this effect was causal, reflecting mechanisms described Aghion et al. (2001), not due selection. Crony skewed distribution toward smaller, less productive firms; enter would have also grown more slowly even absence entry; they enjoyed multiple regulatory fiscal privileges reduced competition investments by noncrony firms, including trade protection, energy subsidies, access land, favorable enforcement. Moreover, subsidies protection account higher profits firms. JEL codes: D72, D24, O47